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Credit card 'hidden' rates soar during Christmas

Looks as though that little piece of plastic can get you into even more trouble at Christmas, with credit card providers giving you a gift of their own in the form of higher rates.

WELL that's not so festive, is it? Around the season that's meant to be jolly, shoppers are being warned to watch their credit card rates and think about switching to a better deal.
The warning follows research by RateCity, which found that many credit card providers have increased their interest rates for purchases on their balance transfer credit cards when the introductory period ends (also known as the revert rate) by 385 basis points on average since December 2007.
It can be dangerous for Australians to use their balance transfer credit cards to make purchases, because often the interest rates are a lot higher than what's on the market.
When you switch to a balance transfer credit card you will be given an introductory rate, for instance 0 per cent for six months. This is the rate that the debt you transferred will receive. You will also have another interest rate for purchases you may make after you receive your new card, such as 12 per cent per annum.
What many people may not realise is that after the introductory period of six months for this example, not only does the interest rate for your transferred debt increase but also the purchase interest rate may rise as well.
While many savvy Australians will start their Christmas shopping now to get it all out of the way before the festive season, it's not worth paying down the added debt if you are using the wrong credit card. For instance, a $2000 bicycle purchased in October using a credit card rate of 19 per cent, could end up costing you an extra $62 by Christmas.
If you do plan to get your Christmas shopping out of the way before December, there is a way to help tackle your debt. You should first pay off your debt before attacking the Christmas shelves and set yourself a budget to avoid clocking up a bill you can't afford to pay back.
Balance transfer credit cards are a great way to avoid paying interest after racking up a debt, but only if they're used properly. In this case, after completing your Christmas shopping, compare your card's interest charges to balance transfer cards from other providers. As long as you plan to pay off the debt before the introductory period ends and don't use the card for expenses, you will be able to enjoy Christmas without the headache of paying interest.

Your say: Do you have a credit card? Do you regularly check out other options? Are you concerned about your credit card spending around Christmas time? Email us on openline@bauer-media.com.au

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